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Greetings, ladies and gentlemen. It's your loving pal Moneylicious Tycoon from Snotra Delux, you can’t afford to leave reading now as this is a two billion and six hundred million kwacha subject. 2 billion Kwacha guys!!!, this is the full amount available for the 2022 Zambia Bond bids for you to take a bite out of. The amount will be substantial regardless of the year in which you read this article. Are you prepared to invest in bonds and other securities? What are they? What is the ideal technique to gain them? Who is able to obtain them? What is the ideal approach for me to gain from bonds? Everything will be explained to you. Simply sit back, relax, and read on.....
Let me explain using an example that even a farmer in Dudumwezi can understand: if John wants to buy a pair of shoes that costs k200, he asks four of his friends to give him k50 each so that he has k200 in total. He promises his buddies that if they give him the k50, he would repay each of them a k70. They agree because they want to earn a k20 profit by borrowing John a k50. Let's take it a step further and assume John wants to purchase a bicycle for k1000, a phone for k1500, a hat for k50, and kitchen supplies for k300. The total will be k2850.
So John goes to his four buddies and tells them he needs k2850 and asks them to give him whatever they can, with a promise of 20 percent interest payback rate. One guy gives him a k50 for the hat, while another offers him a k1000 for the phone, another friend provides a k1000 for the k1500 phone, and yet another offers to top up a k500 on the phone bill while concurrently adding a k300 for the kitchen plates. As a consequence, John now holds the k2850. John will repay the money to his individual companions with a 20 percent interest after the agreed-upon term has ended.
The premise in the previous example is the same concept that controls the operation of government securities. The government is 'john' asking its cronies the 'business companies, institutions, international organizations, and people,' to 'loan' it money through bond purchases. Keep in mind that this is a simplified version of the issue. In the next portion, we'll look at the true definition.
Government securities ma debt instruments issued by the Bank of Zambia on behalf of the Zambian Government, the Bank of Zambia ilachita issue ama debt instruments (Government securities). As a result, when you purchase government securities, you are practically lending money to the Zambian government. So guys apa we can say the government borrows money (‘ilakongola’) from the debt instrument customers (you and Me) by issuing these goods. Treasury bills and government bonds ma examples yama debt instruments. On the maturity date of the instrument, you will tell the government ‘bweza ndrama zanga’ , Okay you won’t say these exact words but the Zambian government is bound to pay the holder of a Treasury bill or Government bond a fixed sum of money.
A government bond is a debt instrument issued on behalf of the Zambian government by the Bank of Zambia. The government borrows money from the purchasers of this instrument by issuing it, often with the promise of periodic interest payments and the return of the face value at maturity. Government bonds are longer-term investments, having a minimum maturity of two years.
The Zambian Financial Markets provide short-term debt securities with (I) mild price risk, (II) good marketability, and (III) little to no default risk. On behalf of the Zambian government, the Bank of Zambia prints Treasury notes at a discount. The bills are given both competitively and non-competitively.
Running a nation demands a great amount of financial power, and the Zambian government must balance its routine tasks while also repaying part of its debt. As a consequence, Zambian government securities are issued to collect funds to pay down maturing debt and support operations and development requirements that are not totally covered by tax revenues.
Treasury bills are short-term debt securities issued by the Zambian government to borrow money for up to a year (maturity date yena ipi), alo ama government bonds are longer-term debt instruments issued by the government to borrow money for more than a year (maturity date yena itali.)
Another discrepancy is the procedure of purchasing Treasury notes and the manner in which interest is paid. Treasury notes are always obtained for less than their face value (par) (par) (par). So, let's say the face value of a Treasury bill is k1000, you purchase it for k800, and the government pays you, the holder of a Treasury bill, an amount equal to the face value on the maturity date, which is a k1000.
As a result, you'll earn a k200 profit. Guys, this is merely a simplified version; I don't mean that treasury notes have a face value of k1000. The interest earned on a Treasury bill is the difference between the price paid to buy the instrument and the face (par) value received at maturity. Unlike Treasury bills, government bonds may be obtained for less (equal to Treasury bills), the same as, or more than their face value. Every six months, the Zambian government pays a specified rate of interest known as the coupon, as well as the face (par) value on maturity.
To begin with, government securities are a safe and secure investment since the Zambian government's complete faith and credit assures that interest and principal payments are paid when due. Government securities are a liquid investment, meaning they may be swiftly sold for cash or used as collateral for loans. So, Sir and Madam reading this, if the government issues a bond and you purchase it, and while you're waiting for it to mature, you decide to start a company but don't have any money, you may use the bonds as collateral. The current Non-Benchmark bond interest rates are as follows (February 2022 ), 2 years 9 percent , 7 years 12 percent and 15 years 14 percent interest rate.
Chaliboboka and everyone who is interested in getting bonds may apply; everyone is very much eligible. The Bank of Zambia authorizes corporations, organizations, foreign entities, and individuals (ordinary individuls kwati iwe naine) to buy government securities. There are just 2 vital necessities needed before you go on a frenzy purchasing bonds and treasury bills: every investor (including you the individual) must have 1, a local commercial bank account denominated in Kwacha, and 2, Registration ili very important. Every investor must register with the Bank of Zambia's Central Securities Depository.
You may purchase government securities by making a bid directly to the Bank of Zambia or via any of the local commercial banks, who will make the offer on your behalf to the Bank of Zambia. You'll need to submit your proposal on a proper application form, which you may acquire at Bank of Zambia locations or download from the Bank of Zambia website (www.boz.zm) (www.boz.zm) (www.boz.zm). Before purchasing any security, you must first register with the Bank of Zambia by filling out a Central Securities Depository (CSD) Application Form with your personal data. The Bank of Zambia Government Securities Registration and Settlement System is known as the CSD. After you've registered, all you have to do now is make a bid on the security you intend to buy.
On behalf of the Zambian government, the Bank of Zambia issues government securities. Government securities are auctioned off in both competitive and non-competitive auctions. Competitive (auction) basis: Specifying an interest rate and the face value of assets they plan to buy, investors compete to lend money to the government. The Bank of Zambia then rates all bids and distributes securities to the lowest-interest-rate investor first, followed by the next-lowest-interest-rate investor, and so on until all of the securities for sale have been distributed. Whereas investors do not define an interest rate on a non-competitive basis. Rather, investors are willing to be allocated assets at an auction-determined interest rate. The cut-off price/rate prevailing during the auction determines the return on investment. As a consequence, an investor does not need to state the rate of return they desire. The investor is a price taker in this case.
Bonds and Treasury notes exist in a multitude of sizes, so even if you're reading this may be able to acquire some. For both Treasury bills and Government bonds, the minimum amount that may be invested is K1,000 face value. Investors who buy between K1,000 and K499,000 will be in the non-competitive window, while those who purchase K500,000 or more will be in the competitive window. Non-competitive investments are made in multiples of K1,000, while competitive investments are made in multiples of K5,000.8.
In Zambia a single price auction procedure is being deployed to issue government securities. This indicates that if you engage in the auction as a competitive bidder, you may finish up paying the cut-off price rather than the amount you indicated in your application. The cut-off price is awarded to all winning bidders. The price is shown in terms of K100 face value. If you prefer to submit a non-competitive bid instead, you will be charged the auction's cut-off price.
Don’t worry, you can apply by any one of the following methods.: a) As long as investors get a Letter of Guarantee, which is a guarantee from your specific commercial bank that it will make settlement on your behalf if your bid is successful. investors wishing to bid through the Bank of Zambia should submit their bids to the Financial Markets Department by 10 hours (and not later) on the exact day yama the auction.. b) They may do so via their respective commercial banks; or Connection to the CSD using a Virtual Private Network (VPN) . VPN is a BoZ-managed communications technology that provides secure connection between CSD users. Any investor who chooses to submit bids directly over the VPN may do so for a price.
If you need cash before the maturity date, you may sell any number of Treasury bills to any interested buyer on the Government securities secondary market. The secondary market is a marketplace where previously issued securities are swapped The Advantages of Investing in Government Securities Government securities provide a variety of advantages: (a) Government securities are no longer in physical form. This indicates that all records are electronically stored and processed. This function guarantees the safety of government securities and provides for transactions of different denominations. (b) Government securities can be employed to secure a loan from a commercial bank or another financial institution. (c) The Zambian Government's full faith and credit assures the prompt payment of interest and principal on Government securities at maturity. As a consequence, government bonds are a highly secure investment. Securities issued by the government are liquid and transferrable.
Only your coupon interest income is subject to the current 15 percent withholding tax and a 1 percent handling fee, both of which are deducted on the payment date for Government bonds. The discount income, on the other hand, is not subject to any levies.
Interest income from Treasury Bills is subject to a 15 percent withholding tax and a 1 percent handling fee, both of which are withheld when the bills mature.
Government securities are appropriately stored on the CSD at the Bank of Zambia in electronic record form. The securities may be maintained in one of two ways: directly in an account registered in your name as a person, or in a designated customers account handled by your bank.
Zambia's government presently borrows money via Treasury notes having maturities of 91 days, 182 days, 273 days, and 364 days. The government also borrows money via government bonds, which come in six different maturities: two years, three years, five years, seven years, ten years, and fifteen years.
Treasury bill auctions take occur every two weeks, and government bond auctions take place once a month (investors will be notified of any changes on the auction frequency) (investors will be warned of any changes on the auction frequencies) (investors will be advised of any changes on the auction frequencies). Government securities auctions are publicized in the week leading up to the sale in periodicals. You will also get mobile notifications to advise you of the dates for impending auctions if you have registered a CSD account and supplied authorisation. Advertisements are also available on the Bank of Zambia's website (www.boz.zm). On the business day following the auction, you will be informed of the result of your bid. On the day of the auction, the Bank of Zambia publishes a summary of the whole Government securities sale on its website, as well as in the newspapers every Monday following the auction.
All transactions are done via commercial banks. Treasury bill interest (discount) is only paid at maturity, paired with the money you invested (principal) . Government bonds pay interest every six months, but the money you invested (principal) is only paid when the bond expires.
Best regards
The Moneylicious Tycoon
Snotra delux
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